Consider the example of the Park Hyatt Philadelphia discussed in the text. Recall that the full fare is $225, the expected full-fare demand is Poisson with mean 27.3, the discount fare is $159, and there are 118 king/queen rooms. Now suppose the cost of an occupied room is $45 per night. That cost includes the labor associated with prepping and cleaning a room, the additional utilities used, and the wear and tear on the furniture and fixtures. Suppose the Park Hyatt wishes to maximize expected profit rather than expected revenue. What is the optimal protection level for the full fare?
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